Government Home Loans

Government home loans fall only on two distinct classifications including Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) guaranteed housing loans. While both the FHA and VA loans are funded by private lenders and not by the government, most of the risks are shifted to government programs to offer opportunities that are sorely amiss with conventional housing loans. Since creditors are supported by FHA and VA government programs, they offer buyers a low 3-percent down payment or to some extent no down payment at all.

The FHA and VA government home loans are backed by both government agencies since these come covered by a mortgage insurance that is of an obviously lower rate than the conventional mortgage insurance. The VA guarantees the mortgage, but then again, this does not mean that the VA pays for any unpaid amortization in case of default. This implies that once people qualify for government home loans, the VA will guarantee the creditor a portion of the loss in cases of foreclosure. These support programs offered by these government agencies drive creditors to be more confident in their offerings, as can be gleamed from the credit proposals they present to prospective buyers.

Typical features of government home loans include a 3-percent down payment or no down payment at all. This extends to lenient credit, debt and income guidelines while down payment and closing costs can be converted into gift funds or integrated into the entire amount of the mortgage. The loan also provides an option for fixed or adjustable interest rates. Moreover, this type of home loan may be assumed by another buyer in the case of VA loans that do not require the payment of mortgage insurance.

FHA-supported government home loans started way back in the 1930s after the Great Depression plagued the United States. The main objectives ensuing government funding were to encourage wider home ownership coverage, to improve housing standards and to streamline the methods associated with financing mortgages. The FHA government home loan program achieved what it originally envisioned and in fact exceeded its target since its inception. The program actually rescued a nation of renters (only 40% homeowners since 1930) and made it a country of homeowners (recent survey puts 65% of its inhabitants as homeowners).

Most government home loans evolve around the US Department of Housing and Urban Development (HUD) where the FHA and VA are integral components. There are actually different acronyms of intensive government agencies involved that offer mortgage to borrowers or fund assistance when buying a home, such as Fannie May, Freddie Mac, Ginnie Mae, HUD, FHA, VA, USDA RHS, NCSHA, HFA that seem like a concoction of different alphabets in a soup.

The first three are corporations charted by congress to provide funds for mortgages intended for government home loans. The USDA RHS is the US Department of Agriculture Rural Housing Service that offers loans to moderate and low-income families in the rural areas for the purchase, construction, repair or relocation of houses, including its facilities; The NCSHA or the National Council of State Housing Agencies is a non-profit organization that assists its low-income members in the acquisition of affordable housing and in coordination with the Housing Finance Agency (HFA), it has helped more than 2 million families purchase their first homes.